FHA Mortgage Insurance Program

FHA mortgage programs are designed, ultimately, to promote home ownership. To accomplish this goal, they help lower the costs of mortgage loans for low and middle income families. FHA programs also protect mortgage companies from default on properties for those buyers who are creditworthy but may not meet other underwriting requirements. The properties must meet certain requirements, and include manufactured homes, single and multiple family properties, and health-related facilities.

Section 203(b) is the main program sponsored by the FHA. Section 203(b) can be traced back to similar programs in the 30s, 40s, and 50s, and other programs that helped shape our modern mortgage system. Today, FHA insures nearly seven million homes valued at a total of over four hundred billion dollars, helping many first time homeowners who would not otherwise be able to qualify for an affordable conventional loan.

Section 203(b) works to do a number of things to make mortgages more affordable. Down payments can be reduced to as little as three percent, in sharp contrast to the conventional floor of ten percent. Closing costs can also be financed through section 203(b), while conventional loans often require the buyer to pay closing costs that can be as high as two to three percent of the total cost for the house. FHA also limits some of the fees mortgage companies might otherwise charge for making a loan. For example, a loan origination fee cannot exceed one percent of the total mortgage amount. Finally, to make sure the FHA is serving low and middle income people, the dollar amount of the mortgage is limited.

These limits and provisions help people who may not have a lot of money on hand still afford to own their home. The FHA makes sure that the dream of owning your own home is more accessible to as many Americans as possible.